Chapter 9 The legal environment

Lecture overview
• Introduction • The influence of the law on society in general • The legal framework of international business
– National law – Public international law – Private international law

• Legal issues confronting international marketers • International bodies which have helped shape the international legal environment

Learning outcomes • Provide practical examples of ways in which the law influences people‟s business and social activities • Describe the three main components of the international legal environment and explain how they interact with one another • Compare the legal tradition and system of international law of South Africa with other countries • Discuss the different ways of resolving international business disputes .

) • Explain why international marketers need to have an appreciation of the law and its different applications both in a local and international context • Compare the respective contributions of the following organisations to the field of international trade law: – UNCITRAL – WTO – ISO – WCO – UNIDROIT – WIPO – ICAO – ICC .Learning outcomes (cont.

What is „the law‟? „The institutional framework which defines acceptable behaviour in a particular society and offers solutions when people deviate from such behaviour‟ All human activity is regulated by legal prescriptions and norms. .

The legal framework of international business International law is a composite of several legal disciplines: .Public international law .Private international law .National law .

the finer application of these laws differ from one country to the next .National law (or domestic law) • The set of rules devised for and enforceable in a particular country • From the broad perspective most countries systems of national law are similar • However.

Human rights .Economic/trade agreements .Public international law • The set of rules governing the relationship between countries and mainly concerns itself with: .Territorial rights .Handling of conflict situations .Diplomatic matters .Internationally accepted commercial rules and practices .

Private international law (conflict of laws) • A set of legal principles used in determining the choice of law and choice of forum in an international contractual dispute • Choice of law: the determination of which country‟s national law will govern the proceedings and outcome of a lawsuit arising out of an international dispute • Choice of forum: the determination of which country‟s court will host the legal proceedings associated with a lawsuit arising out of an international dispute .

Legal tradition in different parts of the world • Legal tradition – A collection of legal characteristics attributed to a group of countries • Broadly classified as western and non-western • Other classifications include: Democratic law-making and government Autocratic law-making and government .

Judicial authority • In non-western legal tradition. spiritual teachings have an over-riding influence .Legislation .Sources of law in the international context • Sources of law: The medium through which law comes into effect • Two main sources in western legal tradition: .

Western legal tradition: Legislation • All the laws which have been devised by bodies with law-making authority • Civil law countries: Recognise legislation as their primary source of law • Judicial does often play an importannt role in their legal system as well .

Western legal tradition: Judicial authority • All the legal opinions which have gone into interpreting and deciding court cases • Where previous rulings are not available. judges would devise their own law to settle the matter – establish precadent • Common law countries: Recognise judicial authority as their primary source of law .

.Non-Western legal tradition: • Legislation and judicial authority are often entrenched as a source of law. but… • Spiritual teachings have an over-riding influence on how laws are formulated and behaviour judged • Based on inspirational views/writings which uphold the view that legal rights and obligations emanate from a higher/holy power • Islamic countries: Recognise the teachings of the Qu‟ran as their primary or major source of law.

Marketing mix considerations and the law Product related issues: • Tariffs and quotas • Foreign technical specifications • Foreign legislation re product marking and labelling • Product liability • Intellectual property rights protection .

Marketing mix considerations and the law Pricing related issues: • Tariffs and other taxes • Anti-dumping legislation • Pre-shipment inspection • Banking and other charges by foreign entities .

Marketing mix considerations and the law Promotional issues: • Relative sophistication of the foreign market / socio-economic groups • Language considerations • Advertising restrictions • Foreign legislation re product labelling .

Marketing mix considerations and the law Market entry and distribution related issues: • Quality of physical infrastructure in the foreign market • Possible restrictions on access to foreign distribution channels • Foreign legislation re company ownership/acquisition. hiring of local labour • Foreign taxation issues .

Different approaches to contracts in different parts of the world Contract “An agreement entered into by two or more parties for the sale of goods or the delivery of a service in exchange for an agreed price or rate of remuneration” Countries differ in their understanding and application of the law and therefore it stands to reason that they will have different views on contracts and the value attached to them .

If the relationship is based on familiarity and trust. . Deviation from the original terms of the contract is not considered irregular as it is accepted that external events often make it necessary for the parties to alter their approach to a transaction or project. The contract is seen as the basis for a trusting and lasting relationship. Typical non-western approach Much time is devoted in the early negotiation phase to get to know the other party. and will be the point of reference if things go wrong.) Typical western approach Little time is devoted in the early negotiation phase to get to know the other party. Deviation from the original terms of the contract normally attracts penalties. the execution of the contract is less likely to be problematic and the prognosis for ongoing business will be good. A contract should precisely spell out the rights and obligations of the parties.Different approaches to contract formation and execution (cont. The relationship remains at a business level and there is an inherent mistrust of the other party – hence the need for a detailed contract document. and its terms and conditions can be quite broad.

• Litigation (public. Each party has his own legal counsel and a judge decides on the culpable party and a suitable remedy. and relatively quick and inexpensive): Involves an arbitrator listening to the viewpoints of the parties and then making his own independent judgment about the guilty party/ies and a suitable remedy.International dispute settlement • Mediation (private. quick and inexpensive): Involves a mediator listening to the viewpoints of the parties and coaxing them to arrive at an acceptable solution between themselves. . The arbitrator‟s decision is final. The judge‟s decision can sometimes be appealed. • Arbitration (private. time-consuming and expensive): Involves the parties to a conflict going to court to resolve their differences.

International bodies which have helped shape the international legal environment • UNCITRAL: Has devised a number of international conventions and model laws pertaining to specific disciplines (e. sales and e-commerce) aimed at promoting greater harmonisation in international trade practice • UNIDROIT: Active in coordinating and harmonising the private laws of different countries.g. and published its own uniform rules and legal guides . transport. Has been a resource to UNCITRAL.

International bodies which have helped shape the international legal environment • WTO: Promotes less restricted international trade (enshrined in a number of agreements) and provides a multilateral forum for negotiations on international trade matters. promoting and administering international norms and standards pertaining to intellectual property. . • WIPO: Active in creating.

• ICAO: Sets technical standards for the global civil aviation industry. standardised international codes for countries and currencies.International bodies which have helped shape the international legal environment • ISO: Promotes standardised international business activity in order to facilitate the exchange of goods and services. . Introduced the metric system. and standardised freight pallets and containers. and encourages uniformity in ground regulations and operations at international airports.

• ICC: Is the central body for all chambers of commerce around the world and is primarily focused on harmonising global trade practices. Formulated the Incoterms. Developed and implemented the Harmonized Commodity Coding System (HS). . the UCP and the URC.International bodies which have helped shape the international legal environment • WCO: Promotes standardisation and harmonisation in customs procedures amongst member countries.

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